Business, Innovation and Skills CommitteePIRC Analysis of Voting on Director Elections 2009 to 2012

Section 1: Voting Trend Analysis

Table 1

AVERAGE LEVEL OF OPPOSITION BY YEAR FOR ALL RESOLUTIONS

Year

Average Oppose%

Average Oppose & Abstain %

2009

1.41

1.99

2010

2.00

2.76

2011

1.92

2.80

2012

2.30

3.26

Table 2

STANDARD DEVIATION OF LEVEL OF OPPOSITION BY YEAR FOR ALL RESOLUTIONS

Year

Average Oppose%

Average Oppose & Abstain %

2009

4.75

5.82

2010

5.12

6.32

2011

4.49

5.71

2012

5.26

6.92

Table 1 shows that, with the exception of 2011, there has been an increase in the average oppose vote year-on-year. When the definition of shareholder concern is expanded to include abstention there is a year-on-year increase in average shareholder dissatisfaction.

Table 2, shows that over time the standard deviation of opposition and dissatisfaction has increased, indicating more outliers with high levels of opposition. This together with the unconformity of the value year-on-year, indicates that shareholders are not necessarily working together to focus concerns on one particular resolution.

Table 3

FTSE100 DIRECTOR ELECTION ANALYSIS (PROPOSED BY THE COMPANY)

2009

2010

2011

2012

No. of proposals

491

541

991

1029

No. withdrawn prior to meeting

1

3

5

1

No. put to meeting

490

538

986

1028

No. of directors not elected

0

0

2

0

Average % For

97.73

97.91

97.5

97.4

Average % Oppose

1.57

1.54

1.6

1.5

Average % Abstain

0.66

0.53

0.87

0.60

No. of proposals > 10% Oppose

14

3

17

23

Table 4

FTSE350 DIRECTOR ELECTION ANALYSIS (PROPOSED BY THE COMPANY)

2009

2010

2011

2012

No. of proposals

1246

1419

2575

2972

No. withdrawn

8

10

10

8

No. put to meeting

1238

1409

2575

2964

No. of directors not elected

0

2

2

0

Average % For

97.15

97.47

97.46

96.48

Average % Oppose

1.81

1.76

1.67

1.88

Average % Abstain

0.86

0.71

0.75

1.02

No. of proposals > 10% Oppose

40

31

56

97

Directors not Elected

EURASIAN NATURAL RESOURCES 2011: Sir Richard Sykes and Kenneth Olisa were both voted off the board. The company has a number of significant shareholders who may or may not have voted en-bloc. There are no obvious governance concerns that would lead shareholders to oppose these directors on audit issues. PIRC has contacted the company for further information on this point. To date the company has not responded.

MITCHELLS & BUTLER 2010: 4 directors (Mitchells & Butlers Plc) were to be appointed by shareholders at the 2010 AGM. Piedmont Inc, who is a 22.8% shareholder, put forward these four resolutions. We have concerns over the independence of the nomination process to appoint them, and consider that they might not act in the interests of all shareholders. At the same time two director were not re-appointed.

Proposals Withdrawn in 2012

SVG CAPITAL: Following an immediate press release on 12 March 2012 before the AGM, Denis Raeburn (NED) decided to retire from the board at the forthcoming AGM on 23 March 2012. As a result, Denis Raeburn would not stand for re-election as a director at the AGM.

DECHRA PHARMACEUTICALS PLC: 1 director from Dechra Pharmaceutical Plc withdrew before the AGM. There was no relevance concerning the resolution on the re-election of Simon Evans (Finance Director) since he resigned from the board. The company stated following the acquisitions of other two companies (Eurovet and Vetxx); it was time to recruit a finance director. There were no other issues in regards to his re-election.

REDROW PLC: 1 director from Redrow Plc withdrew before the meeting. Paul Hampden Smith notified his resignation to the board before the meeting. There were no issues in regards to his re-election. It is worth noting that the executive chairman of the board held around 40% of the company.

AVIVA PLC: 1 director from Aviva Plc withdrew from the AGM. The resolution concerning the re-election of Igal Mayer was no longer relevant as he resigned from the board on 19 April 2012. There were issues about the excessiveness of the company’s remuneration structure.

RIT CAPITAL PARTNERS PLC: Three directors from RIT Capital Partners Plc withdrew from the AGM in July 2012. Mr Mikael Breuer-Weil (Executive director) withdrew before the meeting, announcing that he would start his own money management business. Furthermore, as a result of the company’s recent strategic investments, Messrs Rick Sopher and Bill Winters withdrew before the meeting and would be joining the board of J Rothschild Capital Management Ltd (JRCM). JRCM is a subsidiary of RIT Capital Partners Plc.

HALFORDS GROUP PLC: One director from Halfords Group Plc withdrew before the AGM in July 2012. Mr David Wild (CEO) left the board as CEO with immediate effect. His sudden resignation came in effect after a profit warning over a consistent period of underperformance.

Information is believed to be correct but cannot be guaranteed. Opinions and recommendations constitute our judgement as of this date and are subject to change without notice. The document is not intended as an offer, solicitation or advice to buy or sell securities. Clients of Pensions & Investment Research Consultants Ltd may have a position or engage in transaction in any of the Securities mentioned.

Prepared 24th July 2013